Assessing market microstructure effects via realized volatility measures with an application to the dow Jones industrial average stocks

Awartani, B, Corradi, V and Distaso, W (2009) Assessing market microstructure effects via realized volatility measures with an application to the dow Jones industrial average stocks Journal of Business and Economic Statistics, 27 (2). pp. 251-265.

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Abstract

Transaction prices of financial assets are contaminated by market microstructure effects. This is particularly relevant when estimating volatility using high frequency data. In this article, we assess statistically the effect of microstructure noise on volatility estimators, and test the hypothesis that its variance is independent of the sampling frequency. We provide evidence based on the Dow Jones Industrial Average stocks.We find that noise has a statistically significant effect on volatility estimators at frequencies of 2-3 min or higher. The independently and identically distributed specification with constant variance seems to be a plausible model for microstructure noise, except for ultra high frequencies. © 2009 American Statistical Association.

Item Type:	Article
Divisions :	Surrey research (other units)
Authors :	Name Email ORCID Awartani, B Corradi, V v.corradi@surrey.ac.uk Distaso, W
Date :	1 December 2009
DOI :	10.1198/jbes.2009.0018
Depositing User :	Symplectic Elements
Date Deposited :	16 May 2017 15:27
Last Modified :	24 Jan 2020 14:41
URI:	http://epubs.surrey.ac.uk/id/eprint/819743

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